Judge denies THQ bankruptcy plan, claims it’s unfair to creditors

Last time we mentioned THQ we wished that we’d soon have a chance to write something positive about the company. It’s been months since THQ has seen anything but terrible news, and as the company’s recent bankruptcy filing reveals it’s likely to continue down this dark road for the foreseeable future. Today’s news does little to change that outlook, as it has been revealed that bankruptcy Judge Mary F. Walrath has opted to deny THQ’s proposed plan to reverse its fortunes.

The reason? Walrath believes that THQ attempted to catch prospective buyers of its assets off guard by not revealing that they were for sale until after it had received choice offers from companies of its liking. “I have problems concluding that the pre-petition sale process was fulsome,” writes Judge Walrath in her findings on the case before pointing out that THQ had Clearlake Capital Group (the stalking horse bidder outlined in THQ’s bankruptcy filing) sign a non-disclosure agreement before the company made public that it was up for sale to the highest bidder. Further, Walrath claims that THQ received bids from “around 10 potential buyers” immediately following its public disclosure which the Judge cites as evidence that THQ was attempting to purposely obfuscate the sale of its intellectual property and physical assets in an effort to maximize the amount of cash it might raise.

In a positive note for THQ, those aforementioned “10 potential buyers” are said to include a host of big-name video game publishers, including Warner Bros. who is reportedly quite interested in THQ’s properties.

Unfortunately, if Judge Walrath has her way, THQ’s assets will be auctioned off on a first come, first served basis. She believes that while THQ has plans to use the money raised at auction to cover a $37.5 million bankruptcy loan that must be repaid by January 15, that neither THQ nor those who might soon own its properties are in any particular time crunch, and that the two groups must meet and further negotiate the terms of the bankruptcy agreement so that they might be fair to all involved parties. “I am not convinced that we are under the gun to have a sale process by the 15th,” Walrath writes.

As you might expect, Walrath’s ruling is going to necessarily extend THQ’s stay in financial purgatory. It’s unclear exactly how much longer this bankruptcy case might drag on, but Gamasutra claims that creditors have called for the process to be extended by three weeks. Expect more news on THQ’s dire straits just as soon as Judge Walrath either approves THQ’s bankruptcy plan or outright denies the entire scheme. For THQ’s sake, we’re hoping to see the former as soon as possible, but based on recent history we’re mostly expecting the latter.